Marketing is a guiding

philosophy for the rm

as a whole.
KEY I DEA
Marketing is a set of six
imperatives the must
dos of marketing.
Four marketing princi-
ples guide execution of
the six imperatives.
KEY I DEA
The rms major task is
to attract, retain, and
grow customers by
developing and deliver-
ing valued offers.
The rm enhances
shareholder value by
successfully attracting,
retaining, and growing
customers.
KEY I DEA
The rm has two basic
functions marketing
and innovation.
KEY I DEA
Marketing is critical for
a rms success in
todays increasingly
complex and fast-
changing environment.
KEY I DEA
The shareholder-value
perspective is increas-
ingly widespread
around the world.
KEY I DEA
Customers are the sole
source of rm rev-
enues, and all rm
activities are costs.
Customers are the rms
core assets, yet they do
not appear on the
balance sheet.
Some balance-sheet
assets act as strategic
liabilities.
KEY I DEA
Customers are the
critical source of
cash inows.
KEY I DEA
There are two sides to
value. When the rm
delivers high customer
value, it attracts,
retains, and grows
customers. When the
rm attracts, retains,
and grows customers,
it earns high value for
shareholders.
KEY I DEA
CHAPTER 1: INTRODUCTION TO MANAGING MARKETING
WHAT DOES MARKETI NG MEAN TODAY?
page 5_______________________ page 6_______________________
WHAT I S MARKETI NG?
page 8 __________________________________________________________________________________________________
MARKETI NG AND SHAREHOLDER VALUE
page 9_______________________ page 10 _________________________________________________________________________________________________
CHAPTER 1 I I NTRODUCTI ON TO MANAGI NG MARKETI NG
Marketing must identify
market segments
groups of customers
with similar needs that
value similar benets,
with similar priority
levels.
KEY I DEA
The rm should target
those market segments
that best use its strengths
and exploit competitors
weaknesses.
KEY I DEA
Decisions about the
rms strategic direction
set the stage for
designing the marketing
offer.
KEY I DEA
The Marketing Mix
comprises:
Product
Promotion
Distribution (or Place)
Service
Price
KEY I DEA
Marketing must keep
the rm focused on
customers needs,
regardless of current
feasibility.
KEY I DEA
MARKETI NG AS A PHI LOSOPHY: EXTERNAL AND I NTERNAL ORI ENTATI ONS
page 11______________________
External and internal
orientations are core
concepts for examining
the rms basic
philosophy.
KEY I DEA
The rm should view
marketing expenditures
as an investment, not as
an expense.
KEY I DEA
An externally oriented
rm goes beyond a
customer focus. It
works hard to under-
stand competitors,
markets, and environ-
mental forces in
general.
KEY I DEA
Long-run success is
difcult for internally
oriented rms.
Internal orientations
often focus on opera-
tions, sales, nance,
and/or technology.
KEY I DEA
Marketing should
identify market oppor-
tunities and advise
top management on
potential strategic
actions.
KEY I DEA
page 12______________________ page 13______________________ page 14______________________
THE SI X MARKETI NG I MPERATI VES
page 16______________________ page 17 ___________________________________________________________ page 18______________________
page 19______________________ page 20 _________________________________________________________________________________________________
Marketing must
exercise leadership
to encourage coop-
eration across multiple
functions.
KEY I DEA
Marketing must monitor
and control the rms
actions and perform-
ance to keep it on track.
KEY I DEA
THE FOUR PRI NCI PLES OF MARKETI NG
page 21______________________ page 22______________________ page 23______________________ page 24______________________
Selectivity focuses on
the choice of market or
market segment target.
Concentration refers
to concentrating
resources so as to
deliver value to that
target.
KEY I DEA
The rm earns
marketplace success
by providing value to
customers.
The rm develops,
produces, and delivers
products and services,
but customers perceive
value only in the bene-
ts these products and
services provide.
KEY I DEA
To secure a differential
advantage, customers
must perceive greater
value in the rms offer
than in competitors
offers.
KEY I DEA
The rm achieves
integration by agreeing
on priorities those
involved in designing
and implementing the
offer must develop
close and cooperative
working relationships.
KEY I DEA
CHAPTER 2: THE VALUE OF CUSTOMERS: OPTIMIZING SHAREHOLDER VALUE
OPENI NG CASE: ROYAL BANK OF CANADA
page 31 ___________________________________________________________
When the rm creates
value for customers, it
successfully attracts,
retains, and grows
those customers.
By being attracted,
retained, and grown,
customers create value
for the rm and its
shareholders.
KEY I DEA
Customer lifetime
value (LTV) is the link
between delivering
value to customers
and creating value
for shareholders.
KEY I DEA
CUSTOMER LI FETI ME VALUE ( LTV)
page 32______________________
Customer lifetime
value depends on just
three factors margin,
retention rate, and
discount rate.
KEY I DEA
The margin multiple is a
handy way to calculate
customer lifetime value.
Increasing customer
retention rate has
greater leverage on
customer lifetime value
than reducing the
discount rate.
KEY I DEA
page 34______________________
page 36______________________ page 38______________________
The margin the rm
earns from a customer
tends to increase over
time.
KEY I DEA
I NCREASI NG CUSTOMER LI FETI ME VALUE
Small increases in
customer retention
can dramatically
improve protability
and customer lifetime
value.
KEY I DEA
CHAPTER 2 I THE VAL UE OF CUSTOMERS: OPTI MI ZI NG SHAREHOL DER VAL UE
page 44______________________ page 45______________________
ENHANCI NG CUSTOMER LI FETI ME VALUE
There are three ways
to improve customer
LTV with current
customers improve
customer retention,
grow customer margins,
and delete customers.
KEY I DEA
There are three
approaches to
improving customer
LTV with potential
customers retrieve,
acquire, and ignore
customers.
KEY I DEA
page 45______________________ page 47______________________ page 48______________________ page 49______________________
BEI NG SELECTI VE ABOUT CUSTOMERS
The rm should develop
systems for measuring
customer protability.
KEY I DEA
At many rms, 20%
of customers provide
80% of revenues and
120% of prots.
At these same rms,
80% of customers pro-
vide 20% of revenues
and are responsible for
20% of rm losses.
KEY I DEA
In general, customers
are critical rm assets,
but some customers
may be liabilities and
should be red.
The rm may have to
reject some potential
customers on the basis
of a detailed protability
analysis.
KEY I DEA
Poor protability is
not the only reason to
reject or re customers.
KEY I DEA
page 42______________________
ACQUI RI NG NEW CUSTOMERS
The rm should try to
acquire customers if
the expected customer
lifetime value is greater
than the acquisition
cost.
KEY I DEA
CHAPTER 3: MARKET INSIGHT
page 58______________________
The rm must secure
insight in three broad
areas: the market,
customers, and com-
petitors, the company,
and complementers
the M4Cs.
KEY I DEA
page 61 ___________________________________________________________
OPENI NG CASE: NETFLI X
When rms secure
good market insight,
they do a better job of
identifying opportunities
and gaining competitive
advantage.
KEY I DEA
Market insight com-
prises four separate
aspects market
structure, market and
product evolution,
industry forces, and
environmental forces.
KEY I DEA
page 62______________________ page 63______________________ page 64______________________
MARKET STRUCTURE
Markets consist of
people and organiza-
tions that require goods
and services to satisfy
their needs and are
able and willing to pay.
KEY I DEA
We can view any
market as being made
up of several different
areas.
The rm avoids market-
ing myopia by using a
broad market denition.
KEY I DEA
A useful way of catego-
rizing products in a
market is product class,
product form, product
line, and product item.
KEY I DEA
CHAPTER 3 I MARKET I NSI GHT
The rms current direct
competitors can change
via acquisition, merger,
and LBOs.
KEY I DEA
The rm faces many
forces current direct
competitors, new direct
entrants, indirect com-
petitors, suppliers, and
buyers that can frus-
trate its ability to make
prots and seize new
opportunities.
KEY I DEA
The rm may face new
direct competitors from
geographic expansion,
start-up entry, new
sales and distribution
channels, strategic
alliances, networks,
and the rms own
employees.
KEY I DEA
The rm faces a broad
set of environmental
forces political,
economic, sociocultu-
ral, technological,
legal/regulatory,
and environmental
(physical) PESTLE.
KEY I DEA
Technological
innovation can be
sustaining (improving
performance of
established products)
or disruptive
(offering new
value propositions).
KEY I DEA
Environmental forces
are constantly in ux;
they also interact with
each other.
KEY I DEA
The managerial process
environment comprises
the intellectual capital
for leading and
managing a business.
KEY I DEA
page 72 ___________________________________________________________ page 73______________________
I NDUSTRY FORCES
page 75______________________ page 79______________________ page 82______________________ page 83______________________
ENVI RONMENTAL FORCES
page 67______________________ page 70 ___________________________________________________________
MARKET AND PRODUCT EVOLUTI ON
Critical variables affect-
ing market size include
population size, popula-
tion mix, geographic
population shifts,
income and income
distribution, and age
distribution.
KEY I DEA
Product-form life-cycle
stages have consistent
characteristics across
products and services.
KEY I DEA
Markets and products
generally evolve in a
consistent manner over
time.
The life-cycle frame-
work is useful for
describing market and
product evolution.
KEY I DEA
CHAPTER 4: CUSTOMER INSIGHT
OPENI NG CASE: I KEA
page 89______________________
Customer insight
requires a deep and
unique understanding of
customers.
Good customer insight
requires answers to
three questions: Who
are the customers?
What do they need
and want? How do
they buy?
KEY I DEA
page 90______________________ page 91______________________ page 92______________________
page 93______________________
I DENTI FYI NG CUSTOMERS
To secure customer
insight, the rm must
correctly identify
customers.
KEY I DEA
Macro-level customers
are organizations;
micro-level customers
are individuals.
KEY I DEA
Purchase decisions
involve many customer
roles: decision-maker,
inuencer, spoiler,
champion, specier,
gatekeeper, buyer,
information provider,
and user.
KEY I DEA
The rm must pay
attention to both its
current and potential
customers.
KEY I DEA
Indirect customers may
be more important than
direct customers
they are often nal
users and ultimately
drive product demand.
KEY I DEA
page 94______________________
CHAPTER 4 I CUSTOMER I NSI GHT
page 94 ___________________________________________________________ page 96______________________ page 97______________________
CUSTOMER NEEDS, BENEFI TS, AND VALUES
To attract, retain, and
grow customers, the
rm must:
Develop offers of
value to satisfy
customers needs
Communicate the
value of those offers
to customers.
KEY I DEA
Customers have
recognized needs
and latent needs.
Recognized needs
may be expressed or
non-expressed.
KEY I DEA
Maslows approach
places a persons needs
in an ordered hierarchy.
KEY I DEA
The feature/benet/
value ladder ensures
that the rm focuses
on providing value to
customers, provides
options for communica-
tion, and broadens the
view of competition.
KEY I DEA
page 99______________________ page 100 __________________________________________________________
page 102 __________________________________________________________ page 103_____________________ page 104_____________________
EVC is the maximum
price customers will
pay.
The rm delivers
economic value by
reducing customers
costs and/or increasing
their revenues.
KEY I DEA
To gain greater
customer insight, the
rm must ask: What
motivates people in
customer roles to
behave the way
they do?
KEY I DEA
The rm must deliver
the right combination
of functional, psycho-
logical, and economic
benets and values to
those customers it
wants to attract, retain,
and grow.
KEY I DEA
Customers receive
value from their
experiences.
KEY I DEA
The rm must learn the
customers decision-
making process (DMP).
KEY I DEA
Membership in the
customers considera-
tion set is crucial for
the rm.
KEY I DEA
The rm should try to
understand customers
evaluation processes.
The linear-compensa-
tory approach to
evaluation and choice
balances the rms
performance on the
relevant attributes.
KEY I DEA
page 105_____________________ page 106_____________________
Customers often
deviate from rationality
in making purchase
decisions.
KEY I DEA
There are three
categories of purchase
decision: routinized-
response behavior,
limited problem-solving,
and extended problem-
solving.
KEY I DEA
CUSTOMER I NSI GHT I CHAPTER 4
By identifying sources
of inuence in the
consumer decision-
making process,
rms formulate better
market strategies.
KEY I DEA
page 106_____________________ page 108_____________________ page 109_____________________
I NFLUENCES ON CONSUMER PURCHASE PROCESSES
A variety of environ-
mental factors affect
consumers purchasing
decisions culture,
social class, other
people, family, and the
situation.
KEY I DEA
Individual factors
that affect purchase
decisions include
economic resources,
time availability,
cognitive resources,
comfort with tech-
nology, life-cycle stage,
and lifestyle.
The VALS2 Lifestyle
framework is a useful
approach to under-
standing lifestyles.
KEY I DEA
page 112_____________________
I NFLUENCES ON ORGANI ZATI ONAL PURCHASE PROCESSES
Important consid-
erations for the
organizational
purchase-decision
process are increased
corporate attention to
procurement, changes
in the procurement
process, reducing the
number of suppliers,
and evolution in buyer-
seller relationships.
KEY I DEA
CHAPTER 5: INSIGHT ABOUT COMPETITORS, COMPANY, AND COMPLEMENTERS
Compet i t ors
I DENTI FYI NG COMPETI TORS
page 124_____________________ page 125_____________________ page 127_____________________
Competitive insight is
securing a deep enough
understanding of com-
petitors to provide a
unique perspective.
Competitive insight is
crucial for attracting,
retaining, and growing
customers.
The rm must act on
competitive insight in its
own decision-making.
KEY I DEA
The rms most serious
competitive threats may
be the least obvious.
KEY I DEA
Be aware of potential
competition from within
your own rm.
Be prepared to offer
multiple products as
customer needs evolve.
KEY I DEA
page 129_____________________ page 130_____________________ page 131_____________________
DESCRI BI NG COMPETI TORS
When focusing on com-
petitive data-gathering,
the rm should be clear
about the level and type
of data it requires.
KEY I DEA
The rm can secure
timely competitive
information from many
internal and external
sources.
KEY I DEA
The rm should develop
formal processes to
secure timely and
relevant competitive
information.
KEY I DEA
The rm should not use
unethical or illegal
processes to collect
competitor data.
Leaky organizations
help the rm secure
competitive data.
Good counter-
intelligence procedures
prevent proprietary
data from leaking.
KEY I DEA
page 132 __________________________________________________________ page 133_____________________
The rm should use a
rigorous framework
to organize its data-
gathering.
KEY I DEA
Organizations do not
make decisions
people in organizations
make decisions.
KEY I DEA
I NSI GHT ABOUT COMPETI TORS, COMPANY, AND COMPL EMENTERS I CHAPTER 5
page 135_____________________ page 136_____________________
EVALUATI NG COMPETI TORS
Competitive assessment
analysis is a powerful
tool for marketers.
It maps customer
requirements needs,
benets, and values
into corporate
capabilities/resources.
KEY I DEA
Game theory is a
structured way of
identifying options
and evaluating their
consequences.
KEY I DEA
page 137_____________________ page 138_____________________
PROJECTI NG THE ACTI ONS OF COMPETI TORS
A good approach to
projecting the com-
petitors future actions
is to develop a set of
robust scenarios that
examine the competi-
tors strategic options.
KEY I DEA
The rm projects the
competitors future
actions by identifying
the most likely scenario
from the set of alterna-
tive scenarios.
KEY I DEA
page 139_____________________
MANAGI NG COMPETI TORS
The rm may be able to
manage its competitors
by sending signals.
The major signals
available to the rm
are pre-emptive,
warning, and tit-for-tat.
The rm may also send
competitors misleading
information.
KEY I DEA
Compl ement ers
page 141_____________________ page 142 __________________________________________________________
Independent organiza-
tions, including cus-
tomers and suppliers,
can be the rms
complementers.
KEY I DEA
Competitors can com-
plement the rm in the
marketplace or in the
back ofce. Competitors
can also offer weak
complementarity.
KEY I DEA
A rms complementary
product activities may
be unwelcome by its
competitors.
KEY I DEA
CHAPTER 6: MARKETING RESEARCH
THE MARKETI NG RESEARCH PROCESS
page 153_____________________
The marketing research
process contains
several well-dened
steps that the manager
and the researcher
should follow.
KEY I DEA
CRI TI CAL DI STI NCTI ONS I N MARKETI NG RESEARCH
page 154_____________________ page 155_____________________
Secondary marketing
research uses data
relevant to your
research needs that
have already been
collected for some
other purpose. Primary
market research
requires you to
collect new data.
KEY I DEA
Qualitative marketing
research is not con-
cerned with numbers.
Quantitative market
research focuses on
quantitative analysis.
KEY I DEA
SECURI NG QUALI TATI VE RESEARCH DATA
page 158_____________________
SECURI NG QUANTI TATI VE RESEARCH DATA
page 160_____________________
Focus groups, one-on-
ones, and blogs and
wikis are alternative
means for collecting
qualitative data directly
from respondents.
Projective techniques,
observation, and ethno-
graphic research are
indirect qualitative
data-gathering
approaches.
KEY I DEA
When designing a
process to collect
survey data, the rm
must make several
important trade-offs,
primarily between cost,
time, and exibility.
KEY I DEA
MARKET AND SALES POTENTI ALS, MARKET AND SALES FORECASTS
page 163_____________________ page 165_____________________ page 166_____________________
Market potential is the
maximum sales that
the rm expects in the
market in a given time
period. Sales potential
is the maximum sales
the rm might achieve
in a corresponding
time period.
KEY I DEA
There are several
approaches to making
market forecasts.
One of the most
popular uses multiple
regression analysis.
KEY I DEA
Many rms develop
synthetic sales
forecasts, using a
combination of top-
down and bottom-up
approaches.
KEY I DEA
MARKETI NG RESEARCH I CHAPTER 6
APPENDI X 6. 1: ANALYZI NG QUANTI TATI VE RESEARCH DATA
page 171_____________________ page 175 __________________________________________________________
Cross tabs are a tried
and true method for
analyzing simple
quantitative marketing
research data.
KEY I DEA
Conjoint analysis is a
versatile marketing
research technique
that can provide
signicant insight
into many marketing
questions.
KEY I DEA
Multidimensional
scaling is a valuable
technique for develop-
ing market maps,
aka perceptual maps.
KEY I DEA
Factor analysis helps
the researcher reduce
an unwieldy number
of variables into a
manageable set.
Cluster analysis helps
the researcher to place
many respondents into
meaningful groups.
KEY I DEA
page 176_____________________
A strategy for growth
has four components:
vision, mission, growth
path, and timing of
entry.
KEY I DEA
Vision is the description
of an ideal future state
for a rm or business
unit. Vision sets a broad
direction for the rm.
When developed with
employee participation,
it can inspire the entire
organization for the
long run.
KEY I DEA
The rms mission
should guide its search
for opportunity.
The ve approaches to
developing mission are:
core ingredient or
natural resource,
technology, product
or service, market or
market segment, or
customer needs.
The rms mission can
use a single approach
or combine approaches.
The rm should pro-
actively revise its
mission.
KEY I DEA
The four fundamental
paths to growth are
market penetration,
product growth, market
growth, and product
and market diversica-
tion. These four paths
give rise to nine individ-
ual growth paths.
KEY I DEA
The four timing-of-entry
options pioneer,
follow-the-leader,
segmenter, and
me-too correspond,
respectively, to entry in
the introduction, early
growth, late growth,
and maturity stages of
the product life cycle.
The rm must match
its capabilities to its
timing-of-entry strategy.
These capabilities must
evolve as its markets
evolve.
KEY I DEA
CHAPTER 7: DETERMINE AND RECOMMEND WHICH MARKETS TO ADDRESS
A STRATEGY FOR GROWTH
page 186_____________________ page 187_____________________ page 188_____________________
page 191_____________________ page 193_____________________
DETERMI NE AND RECOMMEND WHI CH MARKETS TO ADDRESS I CHAPTER 7
A venture portfolio
is the set of growth
opportunities the rm
addresses.
The strategy for growth
helps the rm develop
its venture portfolio.
The dening character-
istics of the venture
portfolio are expected
nancial return, timing
of contribution to
prots, and risk.
KEY I DEA
The rm should exam-
ine each opportunity
using four screening
criteria: objectives,
compatibility (or t),
core competence, and
synergy.
KEY I DEA
In setting objectives,
the rm should strike
a balance between
revenue and prot
growth, risk, stability,
and exibility.
KEY I DEA
The three important
dimensions of com-
patibility (or t) are:
product-market t,
product-company t,
and company-market t.
KEY I DEA
The rm should con-
sider four perspectives
when evaluating oppor-
tunities: objectives,
compatibility, core
competence, and
synergy.
KEY I DEA
Options for implement-
ing a growth strategy
include internal devel-
opment, insourcing,
outsourcing, acquisi-
tion, strategic alliance,
licensing and technol-
ogy purchase, and
equity investment.
KEY I DEA
THE VENTURE PORTFOLI O
page 195_____________________
SCREENI NG CRI TERI A: EVALUATI NG OPPORTUNI TI ES
page 196_____________________ page 197_____________________ page 198_____________________ page 199_____________________
I MPLEMENTI NG GROWTH STRATEGI ES
page 204_____________________
CHAPTER 8: MARKET SEGMENTATION AND TARGETING
THE MARKET SEGMENTATI ON PROCESS
page 213_____________________ page 216_____________________ page 218_____________________
Market segmentation
is a conceptual and
analytic process it is
critical for developing
and implementing
an effective market
strategy.
KEY I DEA
Four categories of can-
didate descriptor vari-
ables or segmentation
variables can dene
market segments:
geographic, demo-
graphic, behavioral, and
socio-psychological.
KEY I DEA
In any market,
customers have
different need proles.
The market segmenta-
tion process identies
groups of customers.
When segmentation is
done well, customers
within a segment have
similar need proles.
Customers in different
segments have different
need proles.
KEY I DEA
MARKET SEGMENTS
page 219_____________________ page 220_____________________ page 223 __________________________________________________________
The best approach
for forming market
segments is to group
customers based on
their need proles. The
rm should then use
descriptor or segmenta-
tion variables to identify
the different segments.
KEY I DEA
The market segmen-
tation process can
combine creativity
and sophisticated
data analysis.
KEY I DEA
B2B rms often treat
major customers as
individual market seg-
ments. In B2C markets,
many rms are practic-
ing mass customization.
KEY I DEA
The rm must continu-
ally evolve its segmen-
tation, as customers
need proles evolve.
KEY I DEA
MARKET SEGMENTATI ON AND TARGETI NG I CHAPTER 8
For each segment it
targets, the rm should
develop a unique offer
precisely tailored to
the need prole of cus-
tomers in that segment.
KEY I DEA
In deciding which
segments to target,
the rm should ask
two questions:
How attractive is this
segment?
Does the rm have
the business
strengths to win
in this segment?
KEY I DEA
A rm can improve
its market segment
position by investing
in those business
strengths that
determine success.
A rm may identify
more attractive market
segments by rening its
segmentation approach.
KEY I DEA
Perceptual maps show
how various products
serve customers or
segment needs. They
show market segment
sizes and customer
ideal points in each
segment. These data
help the rm make
targeting decisions.
KEY I DEA
Large rms and small
rms each have
advantages in targeting
market segments.
Mis-steps can cause
each to lose a strong
position.
KEY I DEA
TARGETI NG MARKET SEGMENTS
page 225_____________________ page 226_____________________ page 229_____________________
page 231 __________________________________________________________
The goal of market and
market-segment strate-
gies is very simple
to attract, retain, and
grow customers in the
face of competitors
trying to do the same
thing.
The market strategy is
the rms game plan for
addressing the market.
It states what the rm is
trying to achieve, what
it will do and will not do.
Notably, it identies
those segments the rm
targets for effort.
KEY I DEA
The market strategy
requires decisions
about results, re-
sources, and actions.
Well-developed market
and market-segment
strategies fulll four
purposes for the rm
provide strategic
direction in the market,
state how to secure
differential advantage,
guide the effective
allocation of scarce
resources, and achieve
cross-functional
coordination.
KEY I DEA
Effective market and
market-segment strate-
gies show how the rm
will secure a differential
advantage.
KEY I DEA
An effective market
strategy helps the rm
allocate its resources.
Externally, the rm
allocates resources to
target market segments,
and selects specic
resources to secure
differential advantage.
Internally, the rm
allocates resources
across internal
activities.
KEY I DEA
CHAPTER 9: MARKET STRATEGY THE INTEGRATOR
OPENI NG CASE: MAYO CLI NI C
page 237_____________________
THE PURPOSE OF MARKET AND MARKET-SEGMENT STRATEGI ES
page 238_____________________ page 239_____________________ page 240_____________________
MARKET STRATEGY THE I NTEGRATOR I CHAPTER 9
Inter-functional conict
is endemic. Formulating
the market strategy
should resolve this
conict and achieve
cross-functional
coordination.
KEY I DEA
The rm must make
trade-offs among the
three categories of
strategic objectives:
growth and market
share, protability, and
cash ow.
KEY I DEA
Priorities for strategic
objectives evolve during
product life-cycle
stages.
KEY I DEA
Operational objectives
provide the numbers to
attach to the strategic
objectives; they specify
how much is needed
and by when.
KEY I DEA
Managers should
explicitly discuss
the trade-offs and
expectations among
strategic objectives
before setting opera-
tional objectives.
KEY I DEA
The rm competes for
customer targets
decision-makers or
inuencers.
KEY I DEA
The rms competitive
target can be current
or potential, direct or
indirect, or in the supply
chain. Sometimes the
targeted competitor
is not immediately
obvious.
KEY I DEA
The value proposition
is the rms major
competitive weapon
for gaining its target
customers; it also
denes the rms
implementation focus.
The rm must develop
a value proposition for
each target customer
type.
KEY I DEA
Positioning is not what
you do to a product:
Positioning is what you
do to the mind of the
prospect.
KEY I DEA
ELEMENTS OF THE MARKET-SEGMENT STRATEGY
page 240_____________________
PERFORMANCE OBJECTI VES
page 242_____________________ page 243 ________________________________________________________________________________________________
POSI TI ONI NG
page 251 __________________________________________________________ page 252_____________________ page 253_____________________
CHAPTER 9 I MARKET STRATEGY THE I NTEGRATOR
Together, individual
market segment
strategies must form
a coherent market
strategy. The segment
strategies must be
distinct, yet the rm
should seek out
positive synergies
in implementation
programs.
KEY I DEA
The marketing mix
and other functional
programs implement
the market strategy.
KEY I DEA
Marketing mix pro-
grams should support
the value proposition,
and all elements should
support one another.
KEY I DEA
The rms functional
areas must support the
market strategy.
KEY I DEA
I MPLEMENTATI ON PROGRAMS
page 254_____________________ page 255 ________________________________________________________________________________________________
CHAPTER 10: MANAGING THROUGH THE LIFE CYCLE
OPENI NG CASE: RYANAI R
page 263_____________________
Firms failing to act
pre-emptively may
face signicant
opportunity costs.
KEY I DEA
DEVELOPI NG COMPETI TI VE STRATEGI C OPTI ONS
page 266_____________________
Scenarios help the rm
generate competitive
strategic options.
The main building block
for these scenarios is
product life-cycle stage.
Successful strategies
should have a strong
creative element.
Life cycles are shorten-
ing for many products.
KEY I DEA
BUI LDI NG PRODUCT LI FE-CYCLE SCENARI OS
page 267 __________________________________________________________ page 269 __________________________________________________________
Pioneers must be pre-
pared to tap multiple
sources to fund losses
early in the life cycle.
KEY I DEA
The most common
government-imposed
barriers are patents.
Firms sometimes lobby
governments to impose
regulations on their
competitors.
KEY I DEA
When the rm executes
a low-price penetration
strategy, it must accept
low prot margins for a
substantial time period.
Continual cost reduc-
tions are essential to
sustain low prices.
KEY I DEA
A pioneer can sustain
rst-mover advantages
by producing high-
quality products. The
rm earns a leading
reputation and sets the
stage for creating a
strong brand.
KEY I DEA
page 270_____________________
By the early-growth
stage, customers
accept the product,
and the market leader
should be protable.
KEY I DEA
page 272 __________________________________________________________
Generally, followers in
growth markets are
unprotable and have
negative cash ows.
The followers goal is
to learn from others and
minimize cost and risk.
KEY I DEA
Imitation means
copying the leader
but being more effec-
tive in execution.
Leapfrogging goes
one better than the
leader by developing
innovative and superior
products and/or target-
ing emerging market
segments.
KEY I DEA
CHAPTER 10 I MANAGI NG THROUGH THE L I F E CYCL E
By late growth, basic
customer benets and
values are still impor-
tant but may not enter
into customers choice
decisions. Customers
are more likely to base
their purchase deci-
sions on additional
benets and values.
KEY I DEA
In late growth, the rm
must decide whether to
target many segments
or just a few.
KEY I DEA
Creative Ways to Drive
Growth in the Maturity
Stage
Increase customers
use of the product
Improve the product
or service
Improve physical
distribution
Reduce price
Reposition the brand
Enter new markets
KEY I DEA
Markets that seem
mature may have
growth potential waiting
to be unlocked via
creative approaches.
KEY I DEA
Market leaders in
mature, concentrated
markets should have
low costs, decent
prots, and positive
cash ows.
KEY I DEA
Market leaders in
concentrated markets
have two major
alternatives
long-run leadership
or harvesting.
KEY I DEA
Followers in mature
concentrated markets
typically have higher
costs and lower prots
and are nancially
weaker than market
leaders. But they may
rejuvenate to become a
major threat.
KEY I DEA
Firms can make
considerable prots
in declining markets.
KEY I DEA
In a declining market,
the rms options
depend on market
hospitality and its
business strengths.
KEY I DEA
BUI LDI NG PRODUCT LI FE-CYCLE SCENARI OS CONTI NUED
page 274 __________________________________________________________ page 276_____________________ page 277_____________________
page 278_____________________ page 279_____________________ page 280_____________________ page 282_____________________
In mature fragmented
markets, no rm has a
large market share.
KEY I DEA
page 283 __________________________________________________________
CHAPTER 11: MANAGING BRANDS
WHAT I S A BRAND?
page 295_____________________
The brand is a symbol
around which the rm
and its customers can
construct a relationship.
KEY I DEA
BRAND EQUI TY AND THE VALUE OF BRANDS
page 298_____________________ page 299_____________________
Brand equity reects
the trust established
between the brand
owner and its
customers.
KEY I DEA
Brand equity generally
builds up slowly over
time.
A brand can quickly
lose value if not
managed properly.
KEY I DEA
MONETI ZI NG BRAND EQUI TY
page 300_____________________ page 302_____________________
BUI LDI NG AND SUSTAI NI NG A STRONG BRAND
page 304_____________________ page 305_____________________
Replacement cost
and cash ow
methods are two
internal approaches
for calculating rm
brand equity.
KEY I DEA
The rm earns a
contribution to rm
brand equity only when
a customer purchases
the brand.
KEY I DEA
Carefully chosen
brand identity and
consistent execution
are critical to develop-
ing brand loyalty.
KEY I DEA
Firm brand equity
represents the brands
balance sheet
Brand health checks
compare a brands
strengths against
historic trends and
benchmark competing
brands.
KEY I DEA
MANAGI NG BRAND ARCHI TECTURE
page 305_____________________ page 306_____________________ page 309_____________________ page 310_____________________
The rm should careful-
ly manage the evolution
of its brand portfolio.
Firms adjust their brand
portfolios in response
to shifting consumer
trends, competitive
responses, and mergers
and acquisitions.
KEY I DEA
There are pros and
cons for both multi-
branding and umbrella
branding.
KEY I DEA
Increasingly, global
rms make branding
decisions at head-
quarters, rather than
in individual countries.
Think global, act local!
guides many rms.
Multinational rms
should consider a brand
portfolio that includes
global, regional, and
national brands. Over-
time, the geographic
scope of some brands
may narrow, and other
brands may broaden.
KEY I DEA
Firms that leverage
brands secure auto-
matic brand awareness
for the new product.
They avoid new brand
introduction costs and
may increase prots
for little additional
investment.
For an extension to be
viable, the brand must
have strong positive
associations. The
difference between
these brand associa-
tions and the product
extension should not be
incongruous.
KEY I DEA
CHAPTER 11 I MANAGI NG BRANDS
The rm can conserve
brand equity by effec-
tive brand migration.
KEY I DEA
The rm can enhance
brand equity by effec-
tive strategic alliances.
KEY I DEA
Three ways to reposi-
tion a brand are:
address new market
segments, change
brand associations,
and alter the brands
competitive target.
Continuous innovation
pre-empts the need to
revitalize a brand.
KEY I DEA
MANAGI NG BRAND ARCHI TECTURE CONTI NUED
page 311_____________________ page 312 __________________________________________________________
CHAPTER 12: MANAGING THE PRODUCT LINE
THE PRODUCT PORTFOLI O CONCEPT
page 322_____________________ page 323_____________________ page 324 __________________________________________________________
The rms products
have important
resource-related
interrelationships.
The rm does not
optimize its overall
prots by maximizing
prots from individual
products. It must
consider the entire
product line.
Firms with imbalanced
portfolios are vulnera-
ble to acquisition.
KEY I DEA
Financial analysis
methods rely on fore-
casts these can
be highly uncertain.
Financial analysis
does not consider
strategic issues.
Too much reliance on
nancial analysis can
lead to misallocation
of resources across
products.
Financial analysis
methods ignore
marketing
considerations.
KEY I DEA
Portfolio analysis is a
systematic, organized,
and easily communi-
cated way of assem-
bling, assessing, and
integrating important
information about
product opportunities.
KEY I DEA
Portfolio analysis
addresses many
problems with
nancial analysis.
KEY I DEA
page 325_____________________ page 327_____________________ page 328_____________________
Portfolio analysis is
best viewed as an
additional tool for
setting investment
priorities not as an
alternative to nancial
analysis.
KEY I DEA
Long-run market growth
and RMS dene the
growth-share matrix.
The growth-share
matrix can be overused
and misinterpreted.
KEY I DEA
The rm can use the
multifactor matrix
(Chapter 8) for resource
allocations among
products.
The growth-share and
multifactor matrices
have advantages and
disadvantages that
impact the viability
of strategic
recommendations
that they generate.
KEY I DEA
CHAPTER 12 I MANAGI NG THE PRODUCT L I NE
Sometimes one product
helps another (positive
complementarity);
sometimes it hurts
another (negative
complementarity).
KEY I DEA
When making product
decisions, the rm
should carefully consid-
er current and potential
interactions with the
rms other products.
KEY I DEA
Firms face conicting
pressures for broad
versus narrow product
lines.
ROS and ROI measure
very different things.
KEY I DEA
Firms often differentiate
individual products by
time availability, prod-
uct performance, and
package quantities.
Implementing a rewall
strategy can lead to
product proliferation.
KEY I DEA
Product proliferation
refers to product
variety. Market seg-
mentation explores
differences in customer
needs.
The rm can develop
multiple offers based
on a single product,
targeted to several
segments.
KEY I DEA
A simplied product
line can make the rm
more competitive. But
the rm should use
appropriate criteria for
its deletion decisions.
KEY I DEA
Sometimes the rm can
successfully resurrect
deleted products.
KEY I DEA
Beware deleting prod-
ucts without consider-
ing all relevant issues.
KEY I DEA
OTHER I MPORTANT PRODUCT I NTERRELATI ONSHI PS
page 331 __________________________________________________________
PRODUCT LI NE BREADTH: PROLI FERATI ON VERSUS SI MPLI FI CATI ON
page 332_____________________ page 333_____________________ page 334_____________________
page 336 __________________________________________________________
OTHER PRODUCT LI NE I SSUES
page 336_____________________
CHAPTER 13: DEVELOPING NEW PRODUCTS
OPENI NG CASE: THOMSON FI NANCI AL BOARDLI NK
page 347_____________________
Successful new
products enhance
shareholder value.
KEY I DEA
WHERE AND HOW I NNOVATI ON OCCURS
page 348 __________________________________________________________
NEW PRODUCT DEVELOPMENT
page 352_____________________
Innovation embraces
new products, but also
processes and tech-
nologies.
Sustaining innovations
improve products and
processes on existing
performance dimen-
sions. Disruptive inno-
vations offer different
value propositions.
Leading rms often
invest in sustaining
versus disruptive
innovations.
KEY I DEA
The rm should serve
current, especially
loyal, customers it
must also create new
customers.
KEY I DEA
page 349_____________________ page 351_____________________
The customer-
innovation relationship
involves a two-way
communication ow.
KEY I DEA
Firms can be Isolates,
Followers, Shapers, or
Interactors, based on
their innovation focus
and customer focus.
KEY I DEA
Product development
trade-offs include time,
risk, and nancial
return. Four develop-
ment approaches
are basic technology
research, applied
technology research,
market-focused
development, and
market tinkering.
KEY I DEA
CHAPTER 13 I DEVEL OPI NG NEW PRODUCTS
The rm should
develop clear criteria
for a project to pass
through each gate.
KEY I DEA
The stage-gate process
is a systematic method
for new product devel-
opment. The stages
are idea generation,
preliminary screening,
concept development,
business-case analysis,
development, product
testing, market-factor
testing, test marketing,
and commercialization.
The rm must manage
Type I and Type II
errors.
The cost of failure in-
creases at each stage.
KEY I DEA
The rm should tap
multiple sources for
new ideas.
The best way to get
a good idea is to get
a lot of ideas.
42
KEY I DEA
Preliminary screening
aims to form a balanced
portfolio of new product
ideas.
Different types of new
product idea require
different screening
criteria.
KEY I DEA
The product concept
should appeal to
customers and guide
development.
KEY I DEA
Business-case analysis
assesses the nancial
viability of a product
concept.
Forecasting sales
revenues is the most
difcult step in busi-
ness-case analysis.
KEY I DEA
Many rms make very
large investments in
product development.
Multi-functional
teams and customer
involvement aid the
development process.
Design is an increasing-
ly important part of the
development process.
KEY I DEA
The House of Quality
maps customer needs
into product design.
KEY I DEA
THE STAGE-GATE PROCESS FOR NEW PRODUCT DEVELOPMENT
page 354_____________________
page 361_____________________ page 362_____________________ page 365_____________________ page 366_____________________
page 355_____________________ page 359_____________________ page 360_____________________
DEVEL OPI NG NEW PRODUCTS I CHAPTER 13
The rm should conduct
in-company alpha tests
throughout develop-
ment. It should conduct
customer beta tests in
the latter phases.
Failure to test products
sufciently can have
serious marketing
and nancial
consequences.
KEY I DEA
Market-factor testing
includes simulated
environments and
virtual testing.
Product testing is
insufcient the rm
should test the entire
marketing offer.
KEY I DEA
In deciding on test
marketing, the rm
should be aware of
several pros and cons.
KEY I DEA
Commercialization is
often where rms make
their biggest bets.
KEY I DEA
There are several types
of new product
adopters.
The interplay of several
factors determines the
speed of new product
adoption.
KEY I DEA
page 367 __________________________________________________________ page 368_____________________ page 369_____________________
PRODUCT ADOPTI ON
page 371_____________________
In the communications
process, senders send
information, and
receivers receive infor-
mation.
Miscommunication
arises from problems in
encoding, distortion,
and decoding.
KEY I DEA
Personal communica-
tion is face-to-face with
individuals or groups.
KEY I DEA
Non-personal communi-
cation occurs without
interpersonal contact
between sender and
receiver.
KEY I DEA
Quasi-personal
communications
embrace interaction
and feedback without
human involvement.
KEY I DEA
Word-of-mouth
communication occurs
among customers and
potential customers.
KEY I DEA
The rm has two major
types of communica-
tions targets: those
directly related to the
rms products and
others not directly
related.
KEY I DEA
Most rms use either
push or pull strategies
large rms
often use combination
push/pull strategies.
KEY I DEA
Firms have many com-
munications targets
other than customers.
KEY I DEA
Communications
objectives and timelines
drive the choice of
communication tools.
KEY I DEA
Integration ensures
maximum communica-
tions impact to achieve
rm goals.
KEY I DEA
CHAPTER 14: INTEGRATED MARKETING COMMUNICATIONS
COMMUNI CATI ONS: PROCESS AND TOOLS
page 380 ________________________________________________________________________________________________
page 381_____________________ page 382_____________________
DEVELOPI NG THE COMMUNI CATI ONS STRATEGY
page 383_____________________
I NTEGRATI NG COMMUNI CATI ONS EFFORTS
page 389_____________________
page 384_____________________ page 385_____________________ page 387_____________________
Advertising is critical
for both market and
communications
strategies.
KEY I DEA
Hierarchy-of-effects
models for high
involvement and
low involvement
products are central
to understanding how
advertising works.
KEY I DEA
There are two types
of advertising objec-
tives output and
intermediate.
Output objectives are
what the rm ultimately
wants to achieve.
Intermediate objectives
relate to hierarchy-of-
effects models and
include awareness,
knowledge, liking or
preference, and trial.
KEY I DEA
Creating advertising is
an enigma, more art
than science, mysteri-
ous and unexplainable.
KEY I DEA
Rational-style adver-
tising includes demon-
stration, comparative,
one- and two-sided
appeals, refutational,
and primacy or recency.
Emotional-style adver-
tising includes humor,
fear, celebrity endorse-
ment, and storytelling.
KEY I DEA
In setting media objec-
tives, the rm must con-
sider reach, frequency,
and gross rating points.
The advertising
message must appear
in the right place at
the right time.
Major timing options
are continuous,
ighting, and pulsing.
KEY I DEA
The objective and task
method, based on
marginal analysis,
should underpin the
budgeting process.
Rule-of-thumb
methods can lead to
unsatisfactory results.
KEY I DEA
Evaluating advertising
effectiveness is a
complex task. The rm
must choose among
various types of tests
and measures.
KEY I DEA
Direct marketing offers
advantages over mass
advertising: exibility,
action-oriented cus-
tomer response, better
measurement, pre-
dictability, better
customer knowledge,
ability to tailor the offer,
and ability to identify
prospects.
KEY I DEA
Publicity and Public
Relations relies on an
intermediary, typically
the press, to transmit
a message to a target
audience.
KEY I DEA
Sales promotion is a
potpourri of techniques,
mostly for short-term
objectives.
Poorly designed sales
promotion programs
hurt prots and brand
image.
KEY I DEA
Only quasi-personal
communication taps the
webs true potential.
KEY I DEA
CHAPTER 15: NON-PERSONAL COMMUNICATION
ADVERTI SI NG
page 396_____________________
page 402_____________________ page 407_____________________ page 408_____________________ page 410_____________________
page 397_____________________ page 398_____________________ page 400_____________________
DI RECT MARKETI NG
page 412_____________________
SALES PROMOTI ON
page 415 ____________________
THE I NTERNET
page 417_____________________
PUBLI CI TY AND
PUBLI C RELATI ONS
page 414_____________________
CHAPTER 16: DIRECTING AND MANAGING THE FIELD SALES EFFORT
MARKETI NG S ROLE I N THE FI ELD SALES EFFORT
page 427_____________________ page 428_____________________ page 429 __________________________________________________________
Effectively managing
the sales/marketing
interface is critical
for achieving sales
excellence.
KEY I DEA
Firms often group
customers into separate
tiers like Tier I
(platinum), Tier II (gold),
and Tier III (bronze)
and address each
differently.
KEY I DEA
Some customers
purchase small volumes
but disproportionately
consume the rms
resources.
KEY I DEA
Tier I customers provide
the highest levels of
sales and prots.
Strategic account man-
agers are responsible
for individual accounts.
Global account man-
agers are responsible
for multinational cus-
tomers that want to
make global purchases.
KEY I DEA
THE TASKS OF SALES FORCE MANAGEMENT
page 430 __________________________________________________________ page 431 __________________________________________________________
Sales objectives are
the rms desired
results. Achieving
sales objectives is the
sales forces central
task. Sales objectives
turned into specic
performance require-
ments are called
quotas.
KEY I DEA
page 432_____________________ page 435 __________________________________________________________
Gross sales revenues
are the traditional basis
for sales objectives.
Sometimes rms base
objectives on prot or
prot contribution.
KEY I DEA
Sales objectives
integrate the rms
market strategy and
sales strategy.
KEY I DEA
The rm should break
down sales objectives
by control unit sales
regions, sales districts,
and individual sales
territories. It should
also calendarize sales
objectives quarterly,
monthly, and possibly
weekly.
KEY I DEA
The rm can set sales
objectives related to
customer retention,
market share, price
realization, close
rates, and customer
satisfaction.
KEY I DEA
Salespeople conduct
several activities. In
many rms, they spend
less than 20 percent of
time face-to-face with
customers trying to
make sales.
KEY I DEA
Guidelines should
specify how sales-
people must allocate
their time.
KEY I DEA
DI RECTI NG AND MANAGI NG THE F I EL D SAL ES EF F ORT I CHAPTER 16
page 437 ________________________________________________________________________________________________
page 439 __________________________________________________________ page 440_____________________ page 442_____________________
Selling effort guidelines
must mirror the struc-
ture of sales objectives.
Typically, selling effort
is not proportional to
sales objectives.
The rm must break
down selling effort
allocations by individual
control units like sales
regions, sales districts,
and sales territories.
The rm should allocate
selling effort by account
category.
KEY I DEA
The value proposition
anchors the sales
approach the central
message the sales-
person delivers to
customers.
KEY I DEA
The rm should tailor
the sales message to
different customer
targets and design a
process to explain the
rms benets.
KEY I DEA
Selling is a system to
facilitate customer
buying.
Coaching, counseling,
and training can
improve the selling
process.
KEY I DEA
The employee-based or
outsourced sales force
decision involves con-
trol, cost, and exibility
trade-offs.
KEY I DEA
Key sales organization
design variables are
degree of centralization
or decentralization,
number of management
levels, and span of
control.
Specialization may lead
to higher sales but also
higher costs. It may
also cause problems
when several rm
salespeople sell to the
same customer.
KEY I DEA
The rm should
implement sales force
reorganizations very
carefully.
KEY I DEA
CHAPTER 16 I DI RECTI NG AND MANAGI NG THE F I EL D SAL ES EF F ORT
Sales territories should
have roughly equal
sales potential and
workloads.
KEY I DEA
The rm should actively
engage salespeople
in the sales planning
process.
KEY I DEA
A pipeline system con-
tinually tracks success
at different stages in
the selling process.
Rigorous pipeline
analysis leads to better
forecasts.
KEY I DEA
The rms reward
system should motivate
salesperson behavior.
Primary components
are nancial incentives,
recognition, and
promotions.
The primary ways to
pay salespeople are
salary, commission,
and bonus.
KEY I DEA
The rm should develop
rigorous systems for
recruiting, selecting,
training, retaining, and
replacing salespeople.
KEY I DEA
To simplify translating
product and segment
objectives into sales
objectives, the rm
can focus on existing
versus new products
and existing versus
new customers.
KEY I DEA
THE TASKS OF SALES FORCE MANAGEMENT CONTI NUED
page 443 __________________________________________________________
APPENDI X 16. 1: I LLUSTRATI ON OF SETTI NG OBJECTI VE BY PRODUCT AND CUSTOMER
page 452
page 444
_____________________
page 446_____________________ page 447_____________________
CHAPTER 17: DISTRIBUTION DECISIONS
DI STRI BUTI ON SYSTEMS AND THEI R EVOLUTI ON
page 458_____________________
A distribution channel
comprises many enter-
prises, their interrela-
tionships, and the
functions they perform.
A distribution systems
effectiveness changes
over time.
Distribution arrange-
ments are more difcult
to change than other
marketing implementa-
tion elements.
KEY I DEA
Distribution closes gaps
in physical location and
time between nished
products at the factory
and consumers and
end-user customers.
KEY I DEA
DEVELOPI NG A DI STRI BUTI ON STRATEGY
page 458_____________________ page 460 __________________________________________________________ page 461_____________________
Direct distribution
methods, combined
with database market-
ing, are powerful alter-
natives to indirect
distribution.
KEY I DEA
Advantages for wholly
owned retail distribution
are greater operational
control and earning the
entire retail margin; dis-
advantages are capital
required for growth,
and operating risk.
KEY I DEA
Direct channels:
Supplier rms manage
the contact with con-
sumers and end users.
Indirect channels:
intermediaries like dis-
tributors, wholesalers,
and retailers play a
major role in transfer-
ring products from
suppliers to consumers
and end users.
Intermediaries offer
value-added benets
that suppliers cannot.
They provide product
assortments, shopping
experience, market
access, and often
reduce the costs of
conducting various
distribution functions.
KEY I DEA
CHAPTER 17 I DI STRI BUTI ON DECI SI ONS
For B2B suppliers,
conditions typically
favor either direct or
indirect distribution.
In each case, there
are several options.
KEY I DEA
Suppliers should select
distribution channel(s)
that are appropriate for
their target segment(s)
and perform the
required functions.
Providing customer
benets and values,
rather than traditional
industry practice,
should guide the
suppliers distribution
choices.
KEY I DEA
Critical distribution
strategy decisions
include identifying the
functions to be per-
formed, deciding on
direct versus indirect
channels and distribu-
tion channel breadth,
and setting criteria for
intermediaries.
KEY I DEA
A well-designed com-
pensation system can
help the supplier direct
its distributors efforts.
KEY I DEA
Intermediaries add
value by reducing the
number of relationships
a supplier and end-user
customer must have.
Intermediaries occupy
the nexus between
suppliers and end-user
customers.
KEY I DEA
Distribution channel
members have high
conict potential.
KEY I DEA
When suppliers attempt
to improve their power
positions, they should
try to anticipate the
actions of other
distribution channel
members.
KEY I DEA
The partnership model
is an increasingly
popular alternative to
the power/strategic
conict approach.
Channel members
jointly set goals and
work together for
greater efciency
and effectiveness.
KEY I DEA
Distribution laws vary
by industry and geogra-
phy. What is illegal in
the U.S. may be normal
business practice in
other countries.
In the U.S., many
antitrust lawsuits
involve distribution
issues.
KEY I DEA
DEVELOPI NG A DI STRI BUTI ON STRATEGY CONTI NUED
page 462_____________________
MANAGI NG DI STRI BUTI ON CHANNELS
page 466_____________________
page 471_____________________ page 472_____________________
page 468_____________________
LEGAL I SSUES I N DI STRI BUTI ON
page 473_____________________
page 469_____________________
page 463_____________________ page 464_____________________
CHAPTER 18: MANAGING SERVICES, CUSTOMER SERVICE,
AND CUSTOMER RELATIONSHIP MANAGEMENT
PRODUCTS, SERVI CES, AND CUSTOMER SERVI CE
page 480_____________________ page 481_____________________
Customers buy offers or
promises of benets
and values; the key
element may be a
product or a service.
KEY I DEA
A service is: any act or
performance that one
party can offer another
that is essentially
intangible and does
not result in the
ownership of anything.
Customer service
enhances value
inherent in the core
product or service.
KEY I DEA
CHARACTERI STI CS OF SERVI CES
page 482_____________________ page 483 __________________________________________________________
Services are over 70
percent of employment
and GDP in developed
countries.
Factors driving services
growth are rising
incomes, age-related
demographic shifts,
outsourcing, leveraging
core competence,
franchising, customer
behavior changes,
deregulation, technol-
ogy, and globalization.
KEY I DEA
Moments of truth are
opportunities for
customer satisfaction
or dissatisfaction.
KEY I DEA
Customers often focus
on tangible aspects of
intangible services
service facilities, serv-
ice equipment, service
personnel, and service
guarantees.
Service guarantees
should be uncondi-
tional, painless to
invoke, and easy and
quick to collect. They
should also be simple
to understand and
communicate and
meaningfully related
to the service being
guaranteed.
KEY I DEA
CHAPTER 18 I MANAGI NG SERVI CES, CUSTOMER SERVI CE, AND CUSTOMER REL ATI ONSHI P MANAGEMENT
For services, production
and consumption are
inseparable.
Since the rm cannot
inventory services, it
must either increase or
decrease supply and/or
demand.
KEY I DEA
Reducing variability
is more difcult for
services than for
products.
KEY I DEA
Service variability can
be positive when
human service
providers tailor their
behavior for individual
customers.
The rm can reduce
human variability
through automation.
KEY I DEA
Because they cannot
be inventoried, services
are perishable.
KEY I DEA
Services are divisible
the service blueprint
is the sequence of
activities that make
up the service.
KEY I DEA
People do not acquire
services in a physical
sense.
KEY I DEA
Fellow customers can
inuence the service
experience the
customer is NOT
always right.
KEY I DEA
Expectations
disconrmation is
perceived quality
less expected quality.
SERVQUAL identies
ve gaps for diagnosing
service quality.
KEY I DEA
Variables inuencing
perceived service
quality include
responsiveness,
reliability, assurance,
empathy, and tangibles.
SERVQUALs related
subscale scores pro-
vide actionable items
for improving service
performance.
KEY I DEA
High satisfaction no
longer guarantees high
customer retention.
Firms must delight their
customers.
KEY I DEA
All rms experience
service failures;
how they address
them is key.
KEY I DEA
CHARACTERI STI CS OF SERVI CES CONTI NUED
page 484 __________________________________________________________
SERVI CE QUALI TY
page 487_____________________ page 488_____________________ page 490 __________________________________________________________
page 486 ________________________________________________________________________________________________
page 485 __________________________________________________________
page 491_____________________ page 492_____________________
A drive for service
efciency can lead
to inexible systems
they cannot deal with
idiosyncratic customer
behavior.
KEY I DEA
Few aggrieved
customers complain
they just defect.
Firms should make
complaining easier,
then follow up swiftly
and aggressively.
KEY I DEA
MANAGI NG SERVI CES, CUSTOMER SERVI CE, AND CUSTOMER REL ATI ONSHI P MANAGEMENT I CHAPTER 18
CUSTOMER SERVI CE
page 493 __________________________________________________________
page 495 __________________________________________________________ page 497_____________________
page 494_____________________
CUSTOMER RELATI ONSHI P MANAGEMENT
page 497_____________________ page 498_____________________ page 499_____________________ page 502_____________________
Customer service can
be more central than
the core product or
service.
KEY I DEA
Customer service has
eight ower-of-service
dimensions.
KEY I DEA
Customer service is
different before, during,
and after the purchase.
KEY I DEA
Customers requiring
similar products and
services may have
differing needs for
customer service, and
vice versa.
KEY I DEA
Human capital planning
requires special
attention to recruitment,
selection, training
and development,
appraisal, recognition,
reward, and retention
of customer service
employees.
KEY I DEA
Customer service
infrastructure combines
the technological
and human resources
necessary to deliver
high-level customer
service.
KEY I DEA
Customer defection
rate is a more valuable
performance measure
than customer satisfac-
tion. The rm should
identify and measure
critical elements driving
customer satisfaction.
KEY I DEA
CRM is a synthesis
of marketing, quality
management, and
customer service to
form mutually bene-
cial relationships with
customers.
Technology has an
important role in CRM,
but CRM is not about
technology.
KEY I DEA
Superior customer
databases are relevant,
structured, current,
consistent, accurate,
accessible, complete,
and secure.
The customer database
should distinguish
among customers
on loyalty and value to
the rm.
Customer databases
are more valuable when
they also contain data
about relationships with
competitors.
KEY I DEA
The rm should exam-
ine its privacy policy for
the impact on customer
relationships.
Customer loyalty
programs have many
design parameters.
KEY I DEA
Price has a larger
impact on prots than
any other lever. Price
changes affect margins,
unit volumes, costs, and
customer perceptions.
KEY I DEA
In setting prices, the
rm should consider
perceived customer
value, costs, com-
petition, and strategic
objectives. Excessive
focus on a single
element leads to
suboptimal pricing
decisions.
KEY I DEA
What seems to be a
pricing problem may
be a perceived value
problem.
KEY I DEA
The rm creates value
for customers primarily
via non-price elements
in its offer the
marketing mix.
Many factors affect the
value that customers
perceive in the rms
offer.
KEY I DEA
Price apportions value
some to the rm,
some to customers.
KEY I DEA
Pricing at what the
market will bear is
not useful advice;
the market will bear
many prices.
KEY I DEA
PED helps estimate
market demand when
price changes.
KEY I DEA
CHAPTER 19: MANAGING PRICE AND VALUE
OPENI NG CASE: SOUTHWEST AI RLI NES
page 509_____________________
page 516_____________________
Par t 1: Devel opi ng Pr i ci ng St at egy
page 510_____________________
PERCEI VED CUSTOMER VALUE
page 511 __________________________________________________________ page 515 __________________________________________________________
MANAGI NG PRI CE AND VAL UE I CHAPTER 19
Critical topics in per-
ceived customer value
are creating, measur-
ing, and capturing
value. Customers price
sensitivity is closely
related to value.
KEY I DEA
In cost-plus pricing,
the rm identies its
costs and adds a
prot margin.
Cost-plus pricing
does not consider
customer value.
KEY I DEA
Disadvantages of cost-
plus pricing are prot
limitations, arbitrary
cost measurement, and
mismatch with market
realities.
Firms often determine
xed costs per unit
arbitrarily by assuming
some level of sales
or production.
KEY I DEA
Costs have an important
price-setting role for
birth control, death
control, and prot
planning.
KEY I DEA
Customers do not care
about the rms costs;
they care only about
the value they receive.
The real purpose of
price is not to recover
costs but to capture
value in the customers
mind.
KEY I DEA
The rm should seek
offer superiority, not
price superiority.
KEY I DEA
In high xed cost/
low variable cost
oligopolies, rms often
cut prices to gain extra
volume. Prices can
spiral downward and
prots vanish.
KEY I DEA
Rampant price-cutting
is disastrous for all but
the low-cost producer.
KEY I DEA
The rm has various
price and non-price
actions for responding
to price competition.
KEY I DEA
page 517_____________________
page 519_____________________ page 520_____________________
page 518 __________________________________________________________
COSTS
page 520_____________________ page 521_____________________ page 522_____________________ page 523_____________________
COMPETI TI ON
CHAPTER 19 I MANAGI NG PRI CE AND VAL UE
CMU and CMR are
critical concepts in
price-setting. They
allow the rm to
calculate breakeven
sales volumes for
various pricing options.
KEY I DEA
Many rms make a
xed offer, then vary
the price when under
pressure. Firms with
a price menu have
variable offers with
xed prices.
KEY I DEA
Single product prices
are rare in the real
world.
Pricing actions vary
between highly visible
and opaque.
KEY I DEA
The rm needs good
systems to track ele-
ments in the pricing
toolkit.
The pricing toolkit pro-
duces the pocket price
via the price waterfall.
Pricing toolkit elements
are differentially impor-
tant to customers.
KEY I DEA
The rm should develop
pricing policies at high
levels in the rm.
Price-setting can be a
strategic capability.
KEY I DEA
Many governments
scrutinize prices for
illegal activity.
KEY I DEA
The rm should link
pricing strategy to its
strategic objectives.
KEY I DEA
The rms major options
for strategic objectives
are: maximize growth in
volume and/or market
share, maximize prots,
or maximize cash ow.
KEY I DEA
STRATEGI C OBJECTI VES
page 524 __________________________________________________________
Par t 2: Set t i ng Pr i ces
USI NG PERCEI VED CUSTOMER VALUE, COSTS, COMPETI TI ON, AND STRATEGI C OBJECTI VES
page 530_____________________
TACTI CAL PRI CI NG
page 532_____________________
PRI CI NG MANAGEMENT
page 538_____________________
LEGAL AND ETHI CAL I SSUES I N PRI CI NG
page 539_____________________
page 533_____________________
page 531_____________________
Organizational values
are a common set of
beliefs that guide the
behavior of the rms
members. They are
often integral to a
rms success.
Values statements are
worthwhile only if the
entire rm embraces
them.
KEY I DEA
For organizational
transformation, the
rm must address
organizational struc-
ture, systems and
processes, and human
resource management.
KEY I DEA
Functional organiza-
tions works best when
markets and products
are homogeneous.
KEY I DEA
The rms organiza-
tional structure should
support an integrated
marketing approach.
KEY I DEA
Systems and processes
help produce organiza-
tional outputs and
provide consistency
to customers.
KEY I DEA
CHAPTER 20: ENSURING THE FIRM IMPLEMENTS
THE MARKETING OFFER AS PLANNED
A MODEL FOR DEVELOPI NG AN EXTERNAL ORI ENTATI ON: THE VALUES STATEMENT
page 552_____________________
page 554_____________________ page 555_____________________
TRANSFORMI NG THE ORGANI ZATI ON TO BECOME EXTERNALLY ORI ENTED
page 561 ________________________________________________________________________________________________
Good hard systems
improve operational
efciency. They also
improve marketing
effectiveness and help
secure differential
advantage.
KEY I DEA
CHAPTER 20 I ENSURI NG THE F I RM I MPL EMENTS THE MARKETI NG OF F ER AS PL ANNED
Soft systems can also
help make rms more
externally oriented.
KEY I DEA
HRM gives the rm
many opportunities to
focus on the customer.
If the rm hires the
right people and
develops and manages
them appropriately, an
external orientation
should follow.
KEY I DEA
Hiring experienced
marketers, including
those at the highest
levels, can play a major
role in developing an
external orientation.
Marketing education
can help marketers
learn new behaviors
that help instill an
external perspective.
KEY I DEA
Many rms training
courses include
customer input and/or
participation.
KEY I DEA
Managers at all
functions and levels
should have consistent
and regular contact
with customers.
KEY I DEA
Customer-focused
measures put teeth
into the external
orientation effort.
KEY I DEA
Todays success sows
the seeds of tomorrows
defeat.
KEY I DEA
page 562_____________________ page 563_____________________ page 564 __________________________________________________________
page 565 __________________________________________________________
TRANSFORMI NG THE ORGANI ZATI ON TO BECOME EXTERNALLY ORI ENTED CONTI NUED
page 567_____________________
SUSTAI NI NG AN EXTERNAL ORI ENTATI ON
CHAPTER 21: MONITORING AND CONTROLLING
FIRM PERFORMANCE AND FUNCTIONING
KEY PRI NCI PLES OF MONI TOR-AND-CONTROL PROCESSES
page 574_____________________
page 576 __________________________________________________________
page 575 __________________________________________________________
Monitor-and-control
processes are the most
powerful means of
changing individual
behavior in rms.
Monitor-and-control
processes focus on the
rms results: Is the rm
achieving its planned
results? And on rm
functioning: Is the rm
functioning well?
KEY I DEA
Post-action control
means waiting for a pre-
set time before compar-
ing actual results against
performance standards.
KEY I DEA
Steering control con-
tinually compares the
rms actual results to
performance standards
and allows it to be more
market responsive.
Feedback cycles the
time between the rms
actions and the results
it measures should
not be too short.
KEY I DEA
The rm should use
objective measures for
monitor-and-control
purposes; if scales are
appropriate, these
should be validated.
KEY I DEA
The rm should meas-
ure performance at
multiple organizational
levels.
Good performance in a
unit or sub-unit can
hide poor performance
elsewhere. The rm
must isolate the
problem areas.
KEY I DEA
The rm should
measure both unit
sales volume and
sales revenues.
The rm must ensure
its volume measures
are accurate and
consistently derived.
KEY I DEA
Marketers generally
prefer prot contribu-
tion and direct product
prot measures to
bottom-line prot.
KEY I DEA
Most rms measure
product protability;
fewer rms measure
customer protability.
KEY I DEA
page 581_____________________ page 583_____________________ page 584 __________________________________________________________
MONI TORI NG AND CONTROLLI NG FI RM PERFORMANCE
Sales volume and
protability measures
have serious short-
comings; they dont
show the rms
performance relative
to its competitors.
KEY I DEA
CHAPTER 21 I MONI TORI NG AND CONTROL L I NG F I RM PERF ORMANCE AND F UNCTI ONI NG
Customer satisfaction
and attitudes are widely
used soft measures.
A well-structured,
validated, independ-
ently administered
customer survey
provides the best
soft data.
KEY I DEA
Success on inter-
mediate measures
does not guarantee the
rms output perform-
ance. But the rm can
achieve good output
performance only by
achieving good inter-
mediate performance.
Intermediate objectives
are particularly impor-
tant in long-cycle sales.
KEY I DEA
Implementation control:
Did the rm implement
its planned actions?
KEY I DEA
Strategy control:
Is the rms market
strategy well conceived
and on target?
Post-action approaches
are generally superior
for strategy control.
KEY I DEA
Distinguishing
between strategy
and implementation
problems is crucial.
KEY I DEA
Managerial process
control: Are the rms
processes the best they
can be?
KEY I DEA
The marketing audit is a
comprehensive process
for evaluating the rms
marketing practices.
KEY I DEA
The balanced score-
card reects a steering
control philosophy;
it balances output,
intermediate, and input
marketing measures.
KEY I DEA
page 585_____________________ page 586_____________________
page 587_____________________
page 590_____________________
page 588_____________________ page 589 __________________________________________________________
MONI TORI NG AND CONTROLLI NG FI RM FUNCTI ONI NG
page 592_____________________
THE BALANCED SCORECARD
MONI TORI NG AND CONTROLLI NG FI RM PERFORMANCE CONTI NUED
APPENDIX: FINANCIAL ANALYSIS FOR MARKETING DECISIONS
SECTI ON 1: PARTI TI ONI NG COSTS FOR MARKETI NG DECI SI ON-MAKI NG
page A2 _____________________
page A7 _____________________
page A13 ____________________
page A8 _____________________ page A10 __________________________________________________________
page A5 _____________________ page A6 ___________________________________________________________
Variable costs increase
and decrease as
volumes increase
and decrease.
Fixed costs do not vary
with volume over a
reasonable range.
KEY I DEA
For marketing decision-
making, the rm should
reclassify its costs as
variable and xed.
A contribution magin
approach makes it easy
to calculate the prot
impact of volume
changes.
KEY I DEA
Contribution margin per
unit is contribution on a
per unit basis.
KEY I DEA
At the breakeven point
contribution margin
covers xed costs and
prots are zero.
Prot is a residual. Its
what is left over after
contribution margin
covers xed costs.
KEY I DEA
Managers can change
programmed xed costs
in the short/medium
run. Standby xed
costs only change in
the long run.
KEY I DEA
The rm can use the
breakeven approach to
calculate the prot
impact of changing
programmed xed
costs.
KEY I DEA
The difference between
a direct cost and an
indirect cost is simple
to gure out. If the
product, sales territory,
or function were to go
away and the cost
would also go away,
it is a direct cost. If not,
it is an indirect cost.
KEY I DEA
When the rm drops a
product, other products
must carry its indirect
cost allocations.
KEY I DEA
Activity-based costing
is useful for converting
product income state-
ments into customer
income statements.
KEY I DEA
Retailers typically
express margins as a
percentage of their
selling price.
KEY I DEA
The term margin
means different things
to different people.
When using the term,
take the time to identify
the true meaning in the
specic situation.
KEY I DEA
Shareholder value
analysis should be
used with care.
KEY I DEA
page A15 __________________________________________________________ page A17 ____________________
SECTI ON 2: MARGI NS SECTI ON 3: SHAREHOLD VALUE ANALYSI S